AFRICA EVENT REPORT POD 3 : UTILITY-SCALE RENEWABLES AND STORAGE FOR SOUTH AFRICAN MINES
costs and risks. So, what’s in flux? The regulatory environment, market structure, and forex exposure due to dollar-based EPC pricing given the volatility of the rand currency, are some factors that accentuate uncertainty of project outcomes, according to Reinet. An additional factor, for a larger renewable energy project, is the impact of its accounting in the books. “Even if you have a strong balance sheet, if you have to consolidate the project and the liabilities into your balance sheet, it actually can have quite significant consequences and impact on your credit rating,” observed Reinet.
issues likely in permitting and sizing the project. However, Lael Bethlehem of Sidebelo Platinum asked the participants not to lose sight of the progress that has come about since when REEEP started. Availability of finance, its pricing, an impressive array of EPC and O&M providers, legal expertise (“Every legal firm is now able to give you a decent PPA”), equity investors, and nature’s bounty of solar and wind resources are now working in favor of South African mines in their drive towards decarbonization, said Lael in her views on market developments.
However, other participants too weighed in on the challenges presented by Eskom The tenure mismatch between the length and need for the utility to strengthen its of a PPA (typically 20 years) and the three- grid to receive and evacuate power. Also, five year tenure of the average corporate the swift pivot towards decarbonisation supply contract is also a source of financial and demand for sites to install renewable risk. Not to mention clauses in the PPA energy projects had created a shortage of such as force majeure and termination. suitable locations. One suggestion to mitigate the risks from long-term PPAs was to enable the energy market for aggregation and on-selling of energy where a mine was unable to use or evacuate it. Another key challenge: Eskom. “Changes in the Eskom pricing might impact and influence or will impact and influence the modelling in terms of the financials of these projects,” stated Reinet. Also to consider is whether the mine’s project team is up to speed in terms of experience and knowledge given the
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“There’s talks about some of these grids going to be taking up to 10 years to strengthen and open up those corridors,” observed Rio Tinto’s Andre Botha. “I believe with working together - with government and industries, Eskom, everyone, - we can try and expedite that.” “Because there’s quite a bit of a challenge and also as Lael has mentioned, there are limited sites available that is called shovel-ready, that’s got all the permitting in place.”
